Auditing inventories;

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Bulletin HASKINS & SELLS 3
Auditing Inventories
INVENTORIES are perhaps the most
uncertain element of the balance sheet.
For that reason their verification demands
the exercise of practical judgment and
vision to a greater degree than is usually
required with respect to most of the other
assets. It may be said that practical
business judgment and thorough compre­hension
of the significance of accounts are
essential features of the technical skill
required in all auditing, but there is an
undeniable tendency to let whatever ability
the accountant may possess along those
lines lie dormant until the occasion for its
application is recognized as having arisen.
Some auditing processes are known to
demand the fullest possible application of
all the accountant's ability, and there are
others where, rightly or wrongly, the work
is regarded as clerical and therefore requir­ing
only routine consideration.
The verification of inventories is one of
the best examples that can be cited of
auditing work calling for the utmost pos­sible
exercise of the higher class of account­ing
ability, but very often it is relegated to
the minor position of mechanical routine.
To be sure, certain parts of the work are
clerical, but the tendency is to limit the
auditing to that feature and overlook the
larger aspects.
It is not intended to discuss at this time
the detail procedure of verifying an inven­tory,
but rather to point out some desirable